The shares of Nu Skin Enterprises Inc (NYSE:NUS) plummeted significantly on Thursday on report that the Chinese government is investigating the business operations of the multilevel marketing company (MLM) due to allegations that it is running a pyramid scheme in the country.
The stock price of Nu Skin Enterprises Inc (NYSE:NUS) fell more than 26% to $84.80 per share after the market close on Thursday. During the early trading session today, the stock dropped more than 41% to as low as $67.51 per share. It was the highest intraday decline since its initial public offering (IPO) in 1996, according to Bloomberg.
The investigation of the State Administration for Industry and Commerce (SAIC) was prompted by a report from People’s Daily that the multilevel marketing company is brainwashing itsChinese trainees and it selling 104 products in the country, more than the number of products allowed by the government.
In a statement, SAIC said, “If the situation proves to be true, the commerce department will deal with it according to the law and regulations.”
In response to the report, Nu Skin Enterprises Inc. (NYSE: NUS) said the article of the People’s daily regarding the business operations in the country were inaccurate. The company told Bloomberg, “The article contains inaccuracies and exaggerations that are not representative of our business in China. The publication did not request any information from Nu Skin nor did it attempt to verify any information that it has since reported as fact.”
In addition, Nu Skin Enterprises Inc (NYSE:NUS) emphasized that it is dedicated in operating its business in full compliance with applicable regulations implemented by the government of China. “Nu Skin has an 11-year history of doing business in China under these regulations, and the government has regularly reviewed our business activities,” according to the company.
Furthermore, the multilevel marketing company said is active in educating its sales force to comply with all regulations as well as its policies and procedures. Nu Skin Enterprises Inc (NYSE:NUS) stressed any member of its sales force is subject to discipline if he or she is not following the regulations of the country and company policies.
The trading of the shares of the company was halted four times today because of the reported investigation.